The two variables we’ve left are RelStrengthLookback and LongStDevs, set to 100
days and zero standard deviations, respectively (see code below).
Despite the rather high likelihood for this version to move into negative ter-
ritory, this is the version I will take with me to Part 3, where we will try to use it
as a filter for the other more short-term systems featured in this book. To be sure,
at this point the next step could have been to look closer into the results produced
by various combinations of the two remaining optimizable variables. The same
techniques used to find the best and most reliable stops and exit levels, (which we
look at more closely later), also can be used to fine-tune and optimize the entry
variables for robustness and likelihood for future success. I will not do this here,
but you are free to do so if you wish. Note also that if you do, and altering the
LongStDevs variable doesn’t produce significantly improved results while main-
taining robustness, it too could be scratched, and you’d be down to one optimiz-
able variable.
Now, let’s follow the same line of reasoning for the short side and see what
we can come up with. Table 11.6 shows the results for the original model, tested
on our 25 different markets. With an average profit of $281.39, a profit factor
below 0.9, and a risk factor of 10 cents, the original results for the short side are
a long way from being satisfactory.
Altering the lookback period, first to 50 days and then to 100 days, indicat-
ed that sticking to a shorter lookback period in the neighborhood of 20 to 60 days
is the way to go. In this case, a 50-day lookback period produced a small profit,
whereas the 100-day lookback period dragged the results back into negative terri-
tory again. The deteriorating performance from using a too long lookback period130 PART 2 Trading System Development
Long only: 100-day lookback period, zero st. devs,
no stops, no trailing strength test PercProf: 80.00
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 57.72 39.47 113,784.90 2,746.38 Market
St. Dev: 30.85 13.47 186,768.28 4,494.59 18,421.02 0.13
High: 88.57 52.95 300,553.18 7,240.97 21,167.40 Portfolio
Low: 26.87 26.00 (72,983.38) (1,748.20) (15,674.64) 0.61
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 2.19 0.73 43,547.04 28.29 54.09 29.72
St. Dev: 1.45 0.93 26,720.15 20.88 9.54 7.18
High: 3.64 1.65 70,267.19 49.17 63.63 36.90
Low: 0.74 (0.20) 16,826.89 7.41 44.55 22.54TABLE 11.5
More Variables Altered